Berkshire Hathaway is one of the best investment management firms in the world. Its record over the years has been second to none seeing the share price rise from $265 in1980 to $223,000 today.This is an outstanding return of about 84,050% and has made its much revered chairman Warren Buffet a billionaire in the process.
Berkshire Hathaway has proved to be a great investment for many over the years and I believe it will continue to be for many years as long as mr Buffet who is considered to be the most successful investor ever stays at the hem.
For many, buying into this money making machine that is Berkshire Hathaway may prove difficult. This is because a single share is sold for upwards of $223,000 as mentioned above. Although you can now buy a smaller stake by getting B shares with more limited rights for $140. But there is another option that is cheaper and can make you get an even greater return.
The way to buy into Berkshire Hathaway at an undervalued price is by buying into an investment trust that has a heavy concentration of Berkshire Hathaway stock. An investment trust or closed ended fund lets you pool your money with that of other investors to get exposure to a range of assets through a single investment.
One of the advantages of a unit trust is the possibility to buy into one at a discount. Sometimes, the share price of an investment trust trades below the value of all all the shares in that trust. Buying into an investment trust which is trading at a discount means that you are buying the shares the investment trust holds far cheaper than if you were to buy those shares directly from the stock market. So you can already see the appeal of investment trusts.
Another advantage of an investment trust is they can borrow money to increase their holding in a chosen asset. This has the effect of magnifying gains when stock markets rise. This is particularly useful is this case as Berkshire Hathaway share price has consistently risen over the years. However, on the downside, borrowing money to buy stock amplifies losses if the share price drops.
Now that you know the process of how to buy discounted shares, let’s look at which specific investment trusts are trading at a discount on the market. Most of the unit trusts that have concentrated holdings in Berkshire Hathaway are in America but with platforms such as Hargreaves Lansdown and BestInvest, you can easily trade in these online.
1) Boulder Total Return Fund
- Price: $27.11
- Discount: 16%
- Weight of berkshire Hathaway stock : 35.05%
2 )Boulder Growth and Income fund
- Price: $10.46
- Discount: 17.3 %
- Weight of berkshire Hathaway stock : 31.49%
3) Boulder Denali Fund
- Price: $21.84
- Discount: 20%
- Weight of berkshire Hathaway stock : 29.08%
The above mentioned funds have heavy exposure to Berkshire Hathaway stock. And what makes these funds even better is that they have direct investments in companies that Berkshire Hathaway has a shareholding in such as IBM, Walmart and Wells Fargo.